The Enemy Is Us

There were credit crises long before there were credit default swaps.

AS TENSIONS OVER GREEK DEBT APPEARED COOL, at least temporarily, rhetoric heated up over derivatives that are alleged to have exacerbated the crisis.

First, hedge funds were supposed to have destabilized the Hellenic Republic by having bought credit default swaps to profit from a possible default. Now, it appears, hedge funds are raking it in from having sold CDS on Greek government debt in the expectation that some solution to the crisis would be worked out. Or, at the minimum, the premiums being charged for protection...